Any other business: The time comes when every scheme needs to hire new advisers. But in an industry with such a diverse range of skills, how can you run beauty parades that cut through the patter?
Adrian Kennett, director at independent trustee company Dalriada Trustees, said a scheme would generally make a list of six companies who would be sent a specification to tender for the contract.
This would then be reduced to three – usually including the incumbent – who would be called in to give presentations to the trustees.
“You don’t want to get through an all-day session of an hour [for] each [company],” Kennett said. “You may choose to see all six as a round-one in front of a subcommittee of trustees, who narrow it down to three.”
There are pockets of excellence and pockets of mediocrity within large organisations… it’s a combination of an excellent person and the brand’s corporate reputation
Roger Mattingly, Pan Trustees
Roger Mattingly, director of independent trustee company Pan Trustees, stressed the importance of inviting more than two companies to present. “If you have two, one could win by default if [the other] has a bad day,” he said.
Giving a grilling
Companies are typically given around an hour in total, with 15-20 minutes to present, followed by 40-45 minutes for questions, said Kennett.
“You’re looking at specific deliverables and evidence that they have done it in the past," he said. “You want to see the people who are going to do the job.
"You don’t want two salespeople you’ll never see again. You want specific questions that you can benchmark answers against."
Mattingly said the methods of evaluating providers should vary depending on the contract being tendered for.
“Some are price-sensitive and some are less," he said. "Actuarial valuation is effectively a product, whereas actuarial advice is a service. Service tends to be more value oriented, whereas product tends to be more cost oriented.”
The size of the company is also a factor, as quality could vary more widely within large departments. “There are pockets of excellence and pockets of mediocrity within large organisations… it’s a combination of an excellent person and the brand’s corporate reputation,” Mattingly said.
Small schemes sometimes combined contracts to save money and improve performance – for example, asking companies to tender for both administration and actuarial contracts.
Kennett said: “You might go out to tender on those two together. There are efficiencies to be gained from combining – if you’re [in] the sub-£50m fund size you might wish to do that.
“Otherwise, you can end up with admin and actuarial who spend their lives arguing with each other. At your cost.”
But Vernon Holgate, client director at independent trustee company Capital Cranfield, said schemes often overused beauty parades when hiring, or focused on personality above qualification.
“When I’m in a buyer situation and someone says we’re going to conduct a beauty parade, I usually say ‘do we need to?’," Holgate said. "If we do I’ll try and get them to focus on the important issues. The personal dynamic of who we like shouldn’t have a place in who we pick.”
Beauty parades are rarely necessary when hiring for investment or actuarial positions, but are useful for roles including lawyers, consultants and scheme secretaries, he said.
